Without Considering the Effect That a Change in the Value

question 14

Multiple Choice

Without considering the effect that a change in the value of a currency might have on trade, the net effect of a contractionary fiscal policy is:

• A)ambiguous with respect to the exchange rate, but positive with respect to the trade balance.
• B)ambiguous with respect to the trade balance, but positive with respect to the exchange rate.
• C)negative with respect to the exchange rate and positive with respect to the trade balance.
• D)positive with respect to the exchange rate and negative with respect to the trade balance.

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